How Incentives Demoralize

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 Publicado el 7 de junio de 2013
 Destacado en: Big Ideas & Innovation, Editor's Picks

Barry Schwartz
SeguirBarry Schwartz
Professor of Psychology at Swarthmore College

In the early 1990s, Switzerland was getting ready to have a

national referendum about where it would site nuclear waste
dumps. Citizens had strong views on the issue and were well
informed. Bruno Frey and Felix Oberholzer-Gee, two social
scientists, went door-to-door, asking people whether they would
be willing to have a waste dump in their community. An
astonishing 50% of respondents said yes — this despite the fact
that people generally thought such a dump was potentially
dangerous and would lower the value of their property. The
dumps had to go somewhere, and like it or not, people had
obligations as citizens.

Frey and Oberholzer-Gee then asked a slightly different question.

People were asked whether, if they were given an annual payment
equivalent to 6-weeks worth of an average Swiss salary, they
would be willing to have the dumps in their communities. So
these people, who already had one reason to say yes — their
obligations as citizens — were now given a second reason —
financial incentives. Yet in response to this question, only 25% of
respondents agreed. Adding the financial incentive cut acceptance
in half.

Thus, the Swiss who were given two reasons to accept a nuclear
waste site were less likely to say yes than those only given one.
Frey and Oberholzer-Gee explained this result by arguing that
reasons don’t always add; sometimes, they compete. The Swiss
who were not offered incentives had to decide whether their
responsibilities as citizens outweighed their distaste for having
nuclear wastes dumped in their backyards. Some thought yes, and
others, no. But that was the only question they had to answer.

The situation was more complex when citizens were offered cash
incentives. Now they had to answer another question before they
even got to the issue of accepting the nuclear wastes. “Should I
approach this dilemma as a Swiss citizen or as a self-interested
individual? Citizens have responsibilities, but they’re offering me
money. Maybe the cash is an implicit instruction to me to answer
the question based on the calculation of self interest.” Taking the
lead of the questioners, citizens framed the waste-siting issue as
just about self-interest. With their self-interested hats squarely on
their heads, citizens concluded that six-weeks pay wasn’t enough.
Indeed, they concluded that no amount of money was enough.
The offer of money undermined the moral force of people’s
obligations as citizens. Morality is for suckers, the offer of money
seemed to be saying, even if only implicitly.

Something similar occurred in

an Israeli day care center that was faced with the problem that
more and more parents were coming late — after closing — to
pick up their kids. Since the day care center couldn’t very well
lock up and leave toddlers sitting alone on the steps awaiting their
errant parents, they were stuck. Exhortation to come on time did
not have the desired effect, so the day care center resorted to a
fine for lateness. Now, parents would have two reasons to come
on time. It was their obligation, and they would pay a fine for
failing to meet that obligation.

But the day care center was in for a surprise. When they imposed
a fine for lateness, lateness increased. Prior to the imposition of a
fine, about 25% of parents came late. When the fine was
introduced, the percentage of latecomers rose, to about 33%. As
the fines continued, the percentage of latecomers continued to go
up, reaching about 40% by the 16th week.

Why did the fines have this paradoxical effect? To many of the
parents, it seemed that a fine was just a price. We know that a fine
is not a price. A price is what you pay for a service or a good. It’s
an exchange between willing participants. A fine, in contrast, is
punishment for a transgression. A $25 parking ticket is not the
price for parking; it’s the penalty for parking where parking is not
permitted. But there is nothing to stop people from interpreting a
fine as a price. If it costs you $30 to park in a downtown garage,
you might well calculate that it’s cheaper to park illegally on the
street. Any notion of moral sanction is lost. You’re not doing the
“wrong” thing; you’re doing the economical thing. And to get you
to stop, we’ll have to make the fine (price) for parking illegally
higher than the price for parking in a garage.

That’s exactly what happened in the day care centers. Prior to the
imposition of fines, parents knew it was wrong to come late.
Obviously, many of the parents did not regard this transgression
as serious enough to get them to stop committing it, but there was
no question that what they were doing was wrong. But when fines
were introduced, the moral dimension of their behavior
disappeared. It was now a straightforward financial calculation.
“They’re giving me permission to be late. Is it worth $25? Is that
a good price to pay to let me stay in the office a few minutes
longer? Sure is!” The fine allowed parents to reframe their
behavior as an exchange of a fee (the “fine”) for a “service” (extra
childcare). The fines demoralized what had previously been a
moral act. And this is what incentives can do in general. They can
change the question in people’s minds from “Is this right or
wrong?” to “Is this worth the price?”

Once lost, this moral dimension is hard to recover. When, near the
end of the study, the fines for lateness were discontinued, lateness
became even more prevalent. By the end of the study, the
incidence of lateness had almost doubled. It’s as though the
introduction of fines permanently altered parents’ framing of the
situation from a moral transaction to an economic one. When the
fines were lifted, lateness simply became a better deal.

There is certainly nothing dumb about imposing a fine for

lateness or an incentive for willingness to house a waste dump.
Punishments and rewards. Carrots and sticks. What else is there?
Any one of us might have reached for exactly these tools. But it is
only a small step from the Israeli day care center to teachers who
teach to the test (or cheat by changing student answers), doctors
who treat with their eyes firmly fixed on the bottom line, brokers
who tout junk investments to clients, and rating agencies who turn
a blind eye to the investment instruments being offered by the
companies that are paying them.

Thinking of “smart” incentives as magic bullets is virtually

guaranteed to demoralizeactivities, and practitioners, and
eventually, whole practices. Incentives are meant to be a
substitute for having people who do the right thing because it’s
the right thing. They aren’t.

This post was written with my colleague, Kenneth Sharpe.